Oil logs first gain of the year after 5-session drop

Natural-gas prices settle with a loss on forecasts for warmer weather

LauraHe

SAN FRANCISCO (MarketWatch) — Oil futures on Tuesday posted their first gain of the year with prices breaking a five-session losing streak as traders mulled a potential recovery in Libyan oil output and bet on a weekly decline in U.S. crude supplies.

Natural-gas futures, which had been leading the percentage gains in the energy market, finished lower with forecasts for warmer temperatures, in the wake of a deep freeze in much of the U.S., likely to temper demand for heating fuel.

Crude oil for February delivery
US:CLG4
rose 24 cents, or 0.3%, to $93.67 a barrel on the New York Mercantile Exchange.

Later Tuesday, the oil market will get to see a weekly report on U.S. petroleum supplies from the American Petroleum Institute, a trade group, which is scheduled for release at 4:30 p.m. Eastern. That report will be followed by more closely-watched figures from the U.S. Energy Information Administration on Wednesday.

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A man works on an oil rig drilling into the Bakken shale formation in North Dakota.

Although the EIA figures last week showed a fifth-consecutive , the market “seems to have shrugged this off as a normal seasonal effort by refiners targeting lower year-end stock levels,” Timothy Evans, an energy analyst for Citi Futures, wrote in a recent note.

Analysts polled by Platts forecast a decline of 3.3 million barrels in crude supplies for the week ended Jan. 3. They also expect an increase of 2 million barrels for gasoline inventories and an increase of 1.9 million barrels in distillate stockpiles.

Economic data Monday showed that the U.S. trade deficit dropped to a seasonally adjusted $34.3 billion in November from a revised $39.3 billion in October. Petroleum exports climbed 5.5% in November while petroleum imports shrank by 11.2% to mark the lowest level in three years.

“The increase in crude-oil production has had major ramifications for the trade balance,” said economists at Scotiabank Economics. “The increase in domestic crude production has : a) allowed U.S. refiners to be more selective about the crude that they import in terms of source, quality, and price and b) it has allowed U.S. refiners to dramatically increase their exports of refined petroleum products.”

Libya unrest

Prices on Monday shed 53 cents, or 0.6%, to $93.43 a barrel, on Nymex, marking their lowest settlement in about five weeks as the possible increase in Libyan oil output weighed on the markets.

“Libya is still expected to increase exports in the very near future, which will obviously add to global supply,” said Tyler Richey, an analyst for the 7:00’s Report, which offers daily markets commentary.

“The lack of oil revenues has apparently left Libyan government coffers close to empty, and the government may not be able to pay civil servants in the near future, which will lead to even more unrest,” said analysts at the Kilduff Report.

Meanwhile, “Iraq is in turmoil, again, just as their oil output was seen rising,” the analysts said.

“The central government is said to be readying an assault to thwart the uprising in Fallujah,” they said. “If the operation is unsuccessful, then the security that has been generated, of late, will dissipate.”

Nat gas loses cold weather boost

Back on Nymex, a climb in natural-gas futures gave way to a retreat on Tuesday, with February natural gas
US:NGG14
losing about a penny to $4.30 per million British thermal units after tapping an earlier high at $4.43.

U.S. natural-gas demand reached a record on Tuesday for the second day in a row, but spot prices for the heating fuel are starting to fall with demand expected to ease, according to Platts.

Natural gas delivered to consumers across the U.S. on Tuesday reached 134.3 billion cubic feet per day, topping Monday’s “short-lived record demand” total of 130.4 bcf per day, according to Bentek Energy, Platts’ oil and gas analytics unit.

Platts price data, however, show that day-ahead prices for natural gas delivered on Wednesday have decreased dramatically as demand is forecast to ease, according to Bentek’s director of energy analysis Jack Weixel. Some spot natural-gas prices in the Northeast fell nearly $37 per million British thermal units on Tuesday with forecasts calling for warmer temperatures Wednesday following a bout of extremely cold weather, according to Platts Natural Gas Alert.

February heating oil
US:HOG4
meanwhile, held their gains, tacking on 2 cents, or 0.7%, to $2.96 a gallon. February gasoline
US:RBG4
added 3 cents, or 1.2%, to $2.68 a gallon.

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